The Apple Investor is a daily report from SAI. Sign up here to receive it by email.
AAPL Sliding With Markets
Markets are diving below the flat line after being up in early trading as ADP jobs report blows past expectations. Shares of AAPL also started in the positive but are currently sliding with the rest of tech. Investors remain focused on the revamped iPhone 5 launch in the fall; iPad adoption and the rumoured launch of a smaller version; market share growth of the Mac business lines; the introduction of the anticipated Apple TV set and related products; and evolution of platforms such as Siri, iAd and iBooks. Shares of Apple trade at 10.1x Enterprise Value / Trailing Twelve Months Free Cash Flow (including long-term marketable securities).
Apple Capex Points To Huge Holiday Quarter (AppleInsider)
Increases in capital expenditures historically have a direct correlation to revenue at Apple. The recent spike in spending suggests the company is set to deliver a record quarter of at least $56.4 billion in revenue this holiday season, according to Morgan Stanley analyst Katy Huberty. Excluding retail stores, Apple expects to spend $7.2 billion on capital expenditures in its 2012 fiscal year, which implies over $3 billion in capital outlay for the remainder of the company’s fiscal year. “Apple’s revenue and capex ex-retail stores have been 97% correlated over the past seven years and the acceleration in capex growth signals a similar acceleration in revenue growth, in our view,” says the analyst.
The Future Of Apple Depends On The iPhone 5 (Business Insider)
The iPhone 5 also has more riding on it than pretty much any product in history according to Henry Blodget at Business Insider. It will define Apple’s financial performance and reputation for at least the next couple of years. If the iPhone 5 blows people away, Apple will be set up to clock another year of astounding revenue and earnings growth. If the iPhone 5 disappoints, meanwhile, analysts may have to cut their earnings projections for Apple. Worse, Apple will clearly have lost the lead in a market it created. Why is the iPhone 5 so important financially? Because new information suggest that the iPhone is responsible for the vast majority of Apple’s profits.
Android Peaked In The U.S. While Apple Gained Ground (Strategy Analytics via AppleInsider)
Domestic shipments of Android-based smartphones declined year over year in the second quarter, while Apple saw its iPhone sales grow by 2 million units. Data from Strategy Analytics, reveals that Android’s share of smartphones shipped in the second quarter of 2012 was 56.3%, down from 60.6% last year. Android’s losses proved to be Apple’s. Strategy Analytics said the numbers show that Android’s market share in the U.S. is peaking while Apple’s iPhone continues to gain ground. And that’s only going to grow with the iPhone 5.
The iPhone Announcement Coming On September 12, Where’s The iPad Mini? (BGR)
Both Reuters and Bloomberg confirmed that Apple plans to unveil its next iPhone on September 12th. Interestingly, however, neither nor any other reports have made any mention of the “iPad mini.” iMore has predicted that it would also be unveiled on the 12th alongside a new iPod nano. Are Reuters and Bloomberg’s people familiar with Apple’s plans not familiar enough with Apple’s plans to know about the new tablet, or will we have to wait until some time later this year to finally see the wraps taken off the iPad mini?
Is Apple Considering A Stock Split? (Bloomberg Businessweek)
The company’s decision in March to pay its first dividend in 17 years makes it more likely the stock could be added to the Dow index after a split, according to Toni Sacconaghi, an analyst at Bernstein. “We see the timing as ripe,” Sacconaghi said. “Apple’s initiation of a dividend brings the company in line with all other Dow components. We note that Apple is currently the only company above $215 billion in market cap that pays a dividend and is not included in the Dow.” Apple said in March that it didn’t see a stock split as in the best interest of shareholders, though the company continues to review the possibility. Do you think Apple should split its stock?
Options Investors Make Big Bets On Apple (CNBC)
At shares south of the psychologically important $600 level, institutional investors are making big bets on Apple. According to Fast Money trader Jon Najarian’s proprietary heat seeker, a much larger than usual number of Apple 600 calls traded. That’s a bullish bet that by the third week in August, Apple is trading above $600. “I believe most of the action is due to increased belief that iPhone 5 and Mini iPad will be announced on the same day, September 12,” says Najarian, co-founder OptionMonster.com. And if you’re looking to trade the trend, Najarian says you still have time. “I’m a buyer at current levels. I believe the stock has a lot of room to run.